Labour: Government eating humble pie over pasty tax U-turn

The Labour Party has accused the government of presiding over a ‘total shambles’ after announcing a U-turn on plans to charge VAT on hot pasties.

The government signalled retreat on pasty VAT plans last night (Picture: PA)

Ministers have decided the 20 per cent tax will be levied only on cooked pies and pastries which are being kept warm, with the charge not applying to items which have come fresh out of the oven.

Campaigners against the change claimed the volte-face had saved businesses and jobs but critics said it showed the VAT system was a mess.

In another U-turn, ministers have also dropped their plans to levy 20 per cent VAT on static caravans. The rate will now be five per cent following claims it would cost 7,000 jobs in the caravan industry.

Rachel Reeves, Labour’s shadow chief secretary to the Treasury, said the policy reversals taking place were shambolic.

‘These partial U-turns, just a few weeks after ministers were defending the pasty tax and caravan tax, show just how ill-thought through the Budget was and how out of touch David Cameron and George Osborne are,’ she said.

Shadow treasury minister Chris Leslie added: ‘What a chaotic way to run a country. How on earth can you have a budget process that unravels in a day when you’ve got this kind of shambolic business?’

The choice on offer for pastry fans (Picture: Metro)

The move was proposed in the Budget in March to appease fish and chip shop owners who already have to pay VAT on their food.

But it sparked an outcry from bakers, such as Greggs, who said it would hurt business.

Last night, treasury officials confirmed there had been a change of heart, although a lukewarm pastry will now cost more than a fresh one.

Responding to jibes in the House of Lords from shadow Treasury minister Lord Eatwell as to whether VAT ‘now applied to humble pie’, Treasury commercial secretary Lord Sassoon said: ‘On a number of issues, including the VAT changes, we said we would consult.

‘We have consulted and come up with what we believe is the right approach having talked to a range of interested parties.’

Ken McMeikan, chief executive of bakery firm Greggs, welcomed what he called ‘fantastic news for the customer’.